It is the amount that will be obtained in the future if we invest a given amount of money for a set period of time at a given interest rate. In other words, we can say that:
Future value = Present value + compound interest
Formula
The formula to calculate future value is as follows:
FV = PV ( 1 + i )^n
Where:
FV = Future value
PV = Present value
i = interest rate
n = number of compounded periods
Question
Mr A invested $ 10,000 that yields interest @ 10 {1bb28fb76c3d282be6cfd0391ccf1d9529baae691cd895e2d45215811b51644c} per annum. You are required to calculate the amount of investment after 02 years. Compounding is done semi-annually.
Answer
Here:
PV = 10,000
i = 10 {1bb28fb76c3d282be6cfd0391ccf1d9529baae691cd895e2d45215811b51644c} / 2 = 5 {1bb28fb76c3d282be6cfd0391ccf1d9529baae691cd895e2d45215811b51644c}
n = 2 x 2 = 4
Now, we will plug the values into the Future value formula:
FV = 10,000 (1.05)^4
FV = $ 12,155/-